Intellectual Property and the Limits of Antitrust: A Comparative Study of US and EU Approaches (New Horizons in Competition Law and Economics)

165 Pages·2010·1.98 MB·English

by  Katarzyna Czapracka

Intellectual Property and the Limits of Antitrust
NEWHORIZONS IN COMPETITION LAWAND ECONOMICS
Series Editors:Steven D. Anderman, Department of Law, University of Essex, UKand
Rudolph J.R. Peritz, New York Law School, USA
This series has been created to provide research based analysis and discussion of the
appropriate role for economic thinking in the formulation of competition law and
policy. The books in the series will move beyond studies of the traditional role of
economics – that of helping to define markets and assess market power – to explore the
extent to which economic thinking can play a role in the formulation of legal norms,
such as abuse of a dominant position, restriction of competition and substantial imped-
iments to or lessening of competition. This in many ways is the new horizonof compe-
tition law policy.
US antitrust policy, influenced in its formative years by the Chicago School, has
already experienced an expansion of the role of economic thinking in its competition
rules. Now the EU is committed to a greater role for economic thinking in its Block
Exemption Regulations and Modernisation package as well as possibly in its reform of
Article 82. Yet these developments still raise the issue of the extent to which econom-
ics should be adopted in defining the public interest in competition policy and what role
economists should play in legal argument. The series will provide a forum for research
perspectives that are critical of an unduly-expanded role for economics as well as those
that support its greater use.
Titles in the series include:
Antitrust, Patents and Copyright
EU and US Perspectives
Edited by François Lévêque and Howard Shelanski
Innovation Markets and Competition Analysis
EU Competition Law and US Antitrust Law
Marcus Glader
Competition Law and Patents
AFollow-on Innovation Perspective in the Biopharmaceutical Industry
Irina Haracoglou
Antitrust and Regulation in the EU and US
Legal and Economic Perspectives
Edited by François Lévêque and Howard Shelanski
Competition Law, Innovation and Antitrust
An Analysis of Tying and Technological Integration
Hedvig Schmidt
Intellectual Property and the Limits of Antitrust
AComparative Study of US and EUApproaches
Katarzyna Czapracka
Intellectual Property
and the Limits of
Antitrust
A Comparative Study of US and EU
Approaches
Katarzyna Czapracka
Associate, White &Case LLP, Belgium
NEWHORIZONS IN COMPETITION LAWAND ECONOMICS
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
©Katarzyna Czapracka 2009
All rights reserved. No part of this publication may be reproduced, stored in a
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Acatalogue record for this book is available from the British Library
Library of Congress Control Number: 2009936744
ISBN 978 1 84720 925 2
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Printed and bound by MPG Books Group, UK
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Contents
Acknowledgements vi
Introduction vii
Table of statutes xiii
Table of cases xv
1 The roots of the transatlantic clashes 1
2 Striking the balance between antitrust and IP 36
3 (Mis)use of regulatory procedures and IP 92
4 Trade secrets and antitrust: an example of the conflicting
US and EU approaches 112
Index 135
v
Acknowledgements
My deepest gratitude goes to my teachers and advisors. The Chair of my JSD
Committee, Professor Petros C. Mavroidis, has been a great source of inspira-
tion since the beginning of my studies at Columbia Law School. The ideas and
comments of Professor Harvey J. Goldschmid challenged my thinking and
broadened my horizons. I would also like to thank the editors of the New
Horizons in Law and Economics series for their comments and suggestions,
which have been really helpful. All remaining mistakes are mine.
The cut-off date for the book has been a moving target, but I have attempted
to cover the developments through the end of 2008.
The text draws on the JSD thesis I defended at Columbia School of Law in
2007. The opinions expressed are strictly personal.
vi
Introduction
Application of antitrust rules to intellectual property (IP) has always been a
perplexing subject. It has recently gained importance in the context of new
technologies and the associated market developments. Over the past few
years, the US and EU antitrust enforcers have taken steps to reevaluate their
approach to IPrights and to tackle the related issues concerning application of
the antitrust rules in high-tech sectors of the economy. In the US the Federal
Trade Commission (FTC) and the Department of Justice (DOJ) held months-
long hearings focusing on the intersection of antitrust and IPlaws in 2002 and
published two reports on the topic. Both IP and high-technology industries
were among the issues addressed in the 2007 report published by the Antitrust
Modernization Commission. The agencies have also brought a number of
high-profile cases involving information technology (IT) industries and IP
rights, including Microsoft,1 Intel2 and Rambus.3 Moreover, the Supreme
Court addressed issues of vital importance to the antitrust and intellectual
property intersection in the Illinois Tool4and Trinko5cases.
Equally fundamental developments have taken place on the other side of
the Atlantic. In the spring of 2004, the European Commission adopted a new
Technology Transfer Block Exemption Regulation6and ruled that Microsoft’s
refusal to provide interoperability information to its rivals constituted an abuse
of a dominant position. In 2005, the Commission adopted a ground-breaking
decision in the AstraZenecacase7– the first case in which EU competition law
has been applied to an alleged misuse of the patent system and the procedures
for marketing pharmaceuticals. In the same year, the Commission published
1 U.S. v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001).
2 In the Matter of Intel Corporation, Docket No. 9288, available at:
http://www.ftc.gov/os/adjpro/d9288/index.shtm.
3 In the Matter of Rambus Incorporated, Docket No. 9302, available at:
http://www.ftc.gov/os/adjpro/d9302/index.shtm.
4 Illinois Tool Works Inc. v. Independent Ink, Inc., 126 St. Ct. 1281 (2006).
5 Verizon Communications Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S.
398 (2004). Although the case does not involve IPrights, it is of vital importance for
cases involving a refusal to license IPrights.
6 Commission Regulation No. 772/2004 of 27 April 2004 on the application of
Article 81(3) of the Treaty to categories of technology transfer agreements, OJ (L123)
11 (2004).
7 Commission Decision in COMP/37.507 – Generics/AstraZeneca (2005).
vii
viii Intellectual property and the limits of antitrust
the Article 82 Discussion Paper, which outlined the Commission’s views on
the assessment of unilateral conduct involving intellectual property rights
under competition laws.8In 2007, the Court of First Instance (CFI) delivered
the long- awaited judgment in the Microsoftcase, upholding the Commission’s
position on Microsoft’s obligations to share interoperability information with
its competitors,9and the Commission also issued a statement of objections in
a first case involving an alleged patent ambush. The pharmaceutical sector
inquiry launched by the Commission in 2008 targeted patent settlements
between generic and brand name pharmaceutical companies.10Many of these
recent cases involved a direct conflict between IP rights and antitrust laws,
where the ordered remedies deprived the right holders of exclusivity either by
imposing licensing obligations or by limiting their ability to enforce their
rights.
The recent developments highlight a growing divergence between the EU
and US antitrust enforcers over the approach to the application of antitrust
rules to IPrights. This is so even though there is a broad analytical consensus
as to the economic principles governing the application of antitrust rules to IP
rights. It is equally accepted on both sides of the Atlantic that IPrights do not
create monopolies, that IP and antitrust rules have the common objective of
stimulating innovation and economic growth, and that IP rights need to be
treated with some level of deference so that antitrust enforcement does not
undermine the objectives of IPpolicy. It also appears that in both jurisdictions
the antitrust authorities focus on dynamic competition and incentives to inno-
vate.
8 See European Commission, Directorate General for Competition, DG
Competition Discussion Paper on the Application of Article 82 of the Treaty to
Exclusionary Abuses, 19 Dec. 2005, http://europa.eu.int/comm/competition/antitrust/
others/discpaper2005.pdf (Article 82 Discussion Paper). In December 2008, following
the public consultations the Commission adopted Guidance on the Commission’s
Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary
Conduct by Dominant Undertaking, Communication from the Commission, COM
(2008). The new document, much shorter than the Discussion Paper, does not elaborate
on the Commission’s approach to IPand interoperability information.
9 Case T-201/04, Microsoft Corp. v. Commission (Microsoft judgment), 2007
E.C.R. II-3601.
10 See DG Competition Staff Working Paper, Pharmaceutical Sector Inquiry
Preliminary Report, 28 Nov. 2008, at http://ec.europa.eu/competition/sectors/pharma-
ceuticals/inquiry/exec_summary_en.pdf. The Report does not identify wrongdoing of
individual companies or provide guidance on the compatibility of certain behavior with
EU competition law, but concludes that brand name companies engaged in practices
that delayed market entry of generic medicines and possibility limited innovation in the
pharmaceutical sector. The Commission announced public consultations to consider
steps to address these issues.
Introduction ix
This book strives to offer a better understanding of the roots of the differ-
ences in the application of antitrust principles to IPrights. It focuses on unilat-
eral conduct and on cases where antitrust remedies deprive the right owner of
exclusivity, the core of an IPright. This area merits special attention for two
reasons. First, it is the source of the greatest differences in the approaches of
EU and US antitrust enforcers to IP rights. Second, it is the area where the
application of antitrust rules to IPrights can have the direst consequences for
the right holders.
Whereas the scope of antitrust laws has been shrinking in the United States,
EU competition law has been consistently used to regulate a number of issues
that are considered to be outside the scope of the Sherman Act. In the United
States, unilateral conduct involving exercise of a valid IPright can hardly give
rise to liability under antitrust rules and antitrust authorities have been reluc-
tant to intervene in what is perceived to be the sphere of IPpolicy. In contrast,
the EU antitrust enforcers have been much more active than their US counter-
parts in addressing the consequences of what they perceive as imperfect IP
laws, thus reshaping the substantive standards for IPprotection. In a few cases
involving difficult questions relating to the scope of IPrights, the Commission
and the EU courts have ruled that, in limited circumstances, a dominant
company may violate Article 82 by refusing to license a valid IPright to its
competitors. Allocation of the burden of proof is also significant. For example,
in the recent Microsoft ruling, the CFI required that the dominant company
submit evidence showing that compulsory licensing would have ‘a significant
negative impact on its incentives to innovate’in order to justify its refusal to
share its IPwith competitors.11At the same time, it appears that the Court was
satisfied that a compulsory license would stimulate follow-on innovation on
the basis of less concrete evidence than was required in previous compulsory
licensing cases.
One reason for these divergences is that EU and US courts assess market
power and its abuse quite differently. Monopolization under §2 of the Sherman
Act and an abuse of a dominant position under Article 82 of the EC Treaty
comprise two elements: possession of market power and anticompetitive
conduct. Yet, there are major differences between the EU and US rules relating,
for example, to the definition of dominance, the assessment of what constitutes
anticompetitive conduct, and the requirement of a causal link between mainte-
nance of monopoly power and anticompetitive conduct. Whereas §2 of the
Sherman Act is designed to protect competition by prohibiting the acquisition
or maintenance of ‘monopoly power’, Article 82 is used to regulate the actions
of companies in ‘dominant positions’. One of the principles repeated in EU
11 Microsoftjudgment, ¶697.